Ernst and Young Presentation

Accounting 302 9/18/12 Ernst & Young Guest speaker Response After looking through the Ernst & Young PowerPoint video display, there were authorized(p) points covered that were similar to our chuck melodic line activity from class. One of the fall upon points covered was the idea of purchasing a company, and how much one would pass for it. It was brought to our attention from both the PowerPoint and class lecture that vendees and sellers whitethorn have incompatible perceptions of value. This occurs because buyers do not want to pay up front for unsettled earnings.From what we learned in the Sky Air activity, Thyestean, the monger, is similarly concerned nearly whether or not Kaplan, the agent, will be loyal enough to run accurate data and analysis of his own company. Both the PowerPoint and Sky Air focus on tuition asymmetry, and how it can be reduced. We learned that having an self-governing Board of Directors and external auditor would improve the accuracy in the inf ormation provided to the principal, which will therefore reduce information asymmetry.Another concept we went over in the Sky Air activity that was mentioned in the PowerPoint was the idea that there may be risky acquisitions. We learned from the slides that in order to reduce the risk, the principal must include a request or incentive. The example set forth from the slides included a Technology company was being sold for $100m. The buyer agreed to purchase it, under the circumstance that it shall have to meet certain projections. This shows that even though the shargonholder is affected in the long run, he/she will not be affected (negatively) drastically since there are certain mandatory projections to uphold.Similarly, in the Sky Air case, we came to the conclusion that if the buyer purchases the company, he/she should request that Kaplans compensation be linked to his profits, so that there is less risk (manager cares more about short-term, shareholder cares more about long-te rm, this way manager will care more too). Although the PowerPoint presentation was based more on the financial aspect of the companys acquisition, it still provided relevant information that we learned in class, and too coincided with the Sky Air activity.